Nasdaq-listed Derma Sciences takes 7.3 percent stake in Comvita in discounted placement
Derma Sciences, the Nasdaq-listed company with exclusive global rights to Comvita's Medhoney wound care products, has taken a 7.3 percent stake in the Te Puke-based Manuka honey products firm via a discounted placement.
Comvita [NZX: CVT] raised about $9 million selling about 2.3 million new shares to Derma at $3.90 apiece, a 3.7 percent discount to the stock's closing price on the NZX yesterday of $4.05. Derma chief executive Edward Quilty will join the Comvita board, the company said in a statement. The shares were unchanged when trading opened today.
Comvita chairman Neil Craig said the proceeds of the placement will help fund his company's acquisition of apiaries and modernise its harvest techniques to ensure the company has sufficient supplies of medical-grade Manuka honey to meet growing demand for the Medihoney range.
The honey is Comvita's biggest raw material and the company wants to lift its own production to 50 percent of its needs from 30 percent currently.
The deal strengthens the relationship between the two companies after Comvita inked a global licensing and manufacturing deal with Derma in February 2010 for US$4.25 million, made up of US$2.25 million cash and US$2 million of Derma stock at US$5 apiece. Comvita also got 133,333 options exercisable at US$5.50 and a further 100,000 options at US$6.25, giving it about 12 percent of Derma on a diluted basis.
Shares of Derma last traded at US$14.22 and Comvita said today its equity and warrants stake was now worth about $17.5 million. Since the deal was signed, Comvita's shares have soared 143 percent.
Under the terms of the placement, Comvita has agreed to top up Derma's stake should it issue shares to any other party via a private placement within six months and at a price of 10 percent or below $3.90.
In May, Comvita posted a 10 percent decline in annual profit, beating its guidance, as it coped with a shortage of honey and higher costs.